Notes for Today, March 20th

Jim’s Market Notes:

There are many who believe that you can live a balanced life… I am not one who falls into that stress trap, at least I am working on it very diligently the last two years. I am of the opinion you can only do one thing at a time and you should do it with extreme prejudice of your time until it is completed. It is rewarding to see the results when you focus extremely on something as simple as writing this update each morning. That focused 90-120 minutes results in time to do other things the same way the¬†remainder of my¬†day. That aside, the point is the markets function much the same way. On Wednesday afternoon for two hours the benefits of the Fed’s FOMC press release were obvious and the indexes reversed more than 2% on the news. That is extreme focus for the two hour period following the news. Overnight everyone went home toasted a day of rewards, awoke this morning with some buyers remorse and decided to focus on other projects. Today I am focused on how we end the week. Do we hold the gains? Do we revert back to the trend previous to the Fed announcements? Strong dollar? Weak multinational stocks? Small cap leadership? Rising interest rates and falling bond prices? Rotation? Plenty of questions and not enough answers. As much as we would like to believe there is a balance, the reality is life leans towards the extremes. That is why we cannot¬†forget the sellers have the same ability to be extremely focused. Last day of the trading week and we see how it unfolds.

The leading¬†sectors on Thursday were Healthcare¬†(mainstay leader), Consumer Discretionary¬†(still in an uptrend) and Technology (semiconductors hold upside move).¬†Wednesday’s leadership faded almost as quickly as it came. Looking for the upside to remain micro term (0-13 weeks).

The economic data continues to find weakness as the Philly Fed was below expectations as contraction in the manufacturing sector continues. I have addressed how disappointing the data has been the last 3-4 months. Evidently the Fed has a similar view reading through the notes from the FOMC meeting.

This week I have been watching where the money flows… buyers have been willing to step in¬†and¬†the FOMC statement gave them more reasons to buy. The key to any bounce is a follow through and if we are going to maintain the longer term uptrend versus the current chopping around we need a follow through to the bounce. Progress is being made, but there is still plenty of work to do.

SECTOR NOTES OF INTEREST:

S&P 500 index (SPY) as stated in Wednesday’s notes… need to get through the $209 level of resistance and we accomplished that. It held with modest test on Thursday¬†and a move above $212 would complete the reversal to the previous high.

NASDAQ (QQQ) Internet (FDN) and semiconductors (SOXX) kept the index in positive territory and above the $107 Mark. Nothing great on the day, but it did close in the green. Work to be done plain and simple.

Russell 2000 (IWM) cleared¬†the $123.75 high. Closed at new high and¬†the index is attempting to take on some leadership near term.¬†The large caps were back to their previous struggles on the day allowing the sector to continue hold it’s leadership role for now.

Volatility Index (VIX) dropped to 14 on the FOMC decision. Small jump early, but spent the balance of the day flat. Without the threat of rates currently I don’t see this stirring any problems near term.

Financials (XLF) the fallout of the Fed actions hit the sector on Thursday. The bump higher was a result of the speculation on higher rates would help the banks bottom line. That removed… moving lower to test the previous support levels.

Semiconductors (SOXX) held the positive move from the FOMC meeting and still wants to take on the leadership role short term. Helped the NASDAQ close positive.

Transportation (IYT) Trading sideways as seen with the 50 DMA. Content to swing in the current range. Then why put it here in the sectors to watch? If the downside comes into play historically that is a negative sign for the broad market overall. $156 or the 200 DMA would be the key support level for the sector to hold. Equally if the DJIA makes a new high the transports need to follow on the upside. Trading at the top of the range currently.

Dollar (UUP) big move on upside, but the whiners talked to the Fed and convinced them to talk the dollar lower… and they did just that¬†on Wednesday at the FOMC meeting. They all sobered up overnight an the dollar made a strong recovery of 1.5% of the 2% lost… watching to see how it unfolds.

Bonds¬†(TLT)¬†bounced on fear, followed through on belief the Fed won’t hike rates soon. FOMC meeting pushed it even higher relative to the¬†issue short term…¬†TLT is the upside leader currently and rested on Thursday.

Gold (GLD) tested the $110 low, but bounced on the weaker dollar sparked by the FOMC decision. Sustainable. Follow through anyone? Still watching how this unfolds.

Watching: Biotech (IBB) heading higher? Banks (KBE) does the Fed news pull the bid out from under the sector? Treasury bonds rally (TLT) more or have be tapped out on the mini run higher? Dollar (UUP) move lower and bounce or done? Europe (IEV) moving higher? Emerging markets (EEM) higher on the dollar?

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Long Term Opportunities: 

Long term positions take time to manage and patience to let them unfold. The short term can be managed with hedging or trading off the longer term positions. The goal is to build the position and manage the risk. Sometimes the short term news and events cause anxiety… the goal is to mitigate the risk and protect the downside as we allow the stock time and room to grow. If you don’t like long term holdings don’t read the data below.
  • Facebook (FB) – $73.15 entry (10/16/14) added 1000 shares back relative to the long term outlook following the choppy drop in markets. Earning remain¬†good, but the outlook showed higher costs and has kept pressure on the shares to stay in the current trading range. >¬†Added to position: 500 @ $77.50 – 1/8< ¬†TODAY:¬†¬†Gapped higher and hit new high on Thursday… the patience pays off finally now we see if it can run higher from hear.
  • Twitter (TWTR) – ¬†(1) Added 500 shares at $42.80 (10/28/14). (2)¬†Added 500 shares at $39.20¬†on¬†1/9/15. ¬†(3)¬†Added 500 shares at $40.25 for trade Sold at $46.25 on 3/10/15. This is a long term holding, but we will trade on short term technical data if warranted. TODAY:¬† Use $45 at exit on shares added (#2 above). ¬†Nice bounce on Thursday, but we nee to follow through with some upside.¬†
  • Bank of America (BAC)¬†(1) Added Jan 2016 $17 Calls at $1.15 (avg price)/300 contracts. (2) Added 2500 shares at the $16.35 mark ¬†on 10/21/14. Banks are¬†gaining some ground on the proposed hike in interest rates and I still like our position going forward as we practice patience. TODAY:¬†¬†Not shaping up looking forward and we will look at exiting the position to find a better long term opportunity. HIT STOP and sold positions to move on to other opportunities going forward. T00 many anchors to drag along currently.
  • Whole Foods Market (WFM)¬†(1) Sold our first position for a $6.50 profit on 1000 Shares held from 11/20/14 – 3/11/15. The outlook has improved after making changes to the stores and adding new stores. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. I still like the long term outlook for the company. TODAY:¬†Looking to test the 50 DMA and we watch to see how it unfolds near term. Modest bounce off support. Close below look at selling the puts to get the stock back at favorable price.